Enerpac Q1 Earnings Dip Amid Flat Sales, Rising Inventory

TL;DR

**EPAC's earnings are slipping, and rising inventory is a red flag – time to be cautious.**

AI Summary

ENERPAC TOOL GROUP CORP. (EPAC) reported a slight revenue decrease and a notable decline in net earnings for the three months ended November 30, 2025, compared to the prior year. Net sales fell by 0.68% to $144.2 million from $145.2 million in the same period of 2024. Net earnings decreased by 11.9% to $19.1 million from $21.7 million, resulting in diluted earnings per share of $0.36, down from $0.40. Operating profit also declined by 8.5% to $28.5 million. The company experienced a significant increase in inventories, rising to $90.3 million from $78.8 million at August 31, 2025, and a decrease in cash and cash equivalents by $12.5 million to $139.0 million. Cash provided by operating activities, however, improved to $16.0 million from $8.6 million. Key risks include supply chain issues, geopolitical instability impacting shipping, and increased freight costs, particularly due to Red Sea attacks. The strategic outlook involves evaluating new accounting pronouncements like ASU 2023-09, ASU 2024-03, and ASU 2025-06, which could impact future financial disclosures and reporting practices.

Why It Matters

This 10-Q reveals a challenging quarter for Enerpac Tool Group, with declining profitability despite relatively stable sales. For investors, the 11.9% drop in net earnings and increased inventory levels suggest potential margin pressures and slower demand, which could impact future stock performance. Employees might face scrutiny on operational efficiency as the company navigates higher costs and geopolitical risks. Customers could experience potential delays or price adjustments due to ongoing supply chain and logistics challenges, including Red Sea attacks. In a competitive landscape, these headwinds could make it harder for Enerpac to maintain market share against rivals with more resilient supply chains or stronger pricing power.

Risk Assessment

Risk Level: medium — The risk level is medium due to a combination of declining net earnings by 11.9% to $19.1 million and a significant increase in inventories by $11.5 million to $90.3 million, which could signal slowing demand or overproduction. Additionally, the filing explicitly lists geopolitical activity, including armed conflicts in the Middle East and attacks on commercial ships in the Red Sea, as factors that could cause actual results to differ materially, indicating external operational and cost risks.

Analyst Insight

Investors should closely monitor EPAC's inventory levels and gross profit margins in upcoming quarters to assess demand trends and cost control. Consider holding or reducing positions until there's clear evidence of inventory reduction and a rebound in net earnings, especially given the persistent geopolitical and supply chain risks.

Financial Highlights

revenue

$144.2M

operating Margin

19.8%

total Assets

$818.1M

total Debt

$188.5M

net Income

$19.1M

eps

$0.36

gross Margin

50.7%

cash Position

$139.0M

revenue Growth

-0.68%

Key Numbers

• $144.2M — Net sales (decreased by 0.68% from $145.2M in Q1 2024)
• $19.1M — Net earnings (decreased by 11.9% from $21.7M in Q1 2024)
• $0.36 — Diluted EPS (decreased from $0.40 in Q1 2024)
• $90.3M — Inventories, net (increased from $78.8M at August 31, 2025)
• $139.0M — Cash and cash equivalents (decreased from $151.6M at August 31, 2025)
• $16.0M — Cash provided by operating activities (increased from $8.6M in Q1 2024)
• $28.5M — Operating profit (decreased by 8.5% from $31.1M in Q1 2024)
• 52,776,305 — Shares outstanding (as of December 15, 2025)

Key Players & Entities

• ENERPAC TOOL GROUP CORP. (company) — registrant
• Milwaukee, Wisconsin (location) — headquarters
• FASB (regulator) — Financial Accounting Standards Board
• ASU 2023-09 (regulation) — Income Taxes (Topic 470): Improvements to Income Tax Disclosures
• ASU 2024-03 (regulation) — Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses
• ASU 2025-06 (regulation) — Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software
• Red Sea (location) — shipping route affected by attacks
• Middle East (location) — region with armed conflicts

FAQ

Risk Factors

• Inventory Increase [medium — operational]: Inventories increased significantly to $90.3 million from $78.8 million at August 31, 2025. This rise could indicate slower sales or potential obsolescence, tying up working capital.
• Supply Chain and Freight Costs [high — operational]: The company faces risks from supply chain disruptions and increased freight costs, exacerbated by geopolitical instability such as Red Sea attacks. These factors can impact product availability and profitability.

Industry Context

Enerpac Tool Group operates in the industrial tools and equipment sector, which is sensitive to global manufacturing output and infrastructure spending. The industry is characterized by a need for specialized, durable products and often involves complex global supply chains. Recent trends include a focus on automation, efficiency improvements, and navigating supply chain volatility.

Regulatory Implications

The company is evaluating new accounting pronouncements such as ASU 2023-09, ASU 2024-03, and ASU 2025-06. These updates could alter future financial disclosures, particularly concerning areas like income taxes or lease accounting, requiring careful implementation and reporting.

What Investors Should Do

1. Monitor inventory levels closely.
2. Assess the impact of supply chain and freight cost pressures.
3. Analyze the drivers of the net earnings decline.

Glossary

Amortization of intangible assets

The systematic allocation of the cost of an intangible asset over its useful life. This is similar to depreciation for tangible assets. (An increase in amortization expenses from $1.2M to $1.6M contributed to lower operating profit.)

Other comprehensive income (loss)

Gains and losses that are not reported in the income statement but are recorded directly in shareholders' equity. This includes items like foreign currency translation adjustments. (The company reported a significant other comprehensive loss of $4.6M, primarily due to foreign currency translation adjustments, impacting total comprehensive income.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets. (Goodwill represents a substantial portion of the company's assets at $288.0M, indicating past acquisitions.)

Accumulated other comprehensive loss

The cumulative amount of other comprehensive income (loss) recognized since the company's inception. (This account shows a significant negative balance of $108.8M, reflecting the impact of items like foreign currency translation on the company's equity.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, Enerpac Tool Group experienced a slight 0.68% decrease in net sales, reaching $144.2 million. More significantly, net earnings declined by 11.9% to $19.1 million, leading to a drop in diluted EPS to $0.36 from $0.40. Operating profit also saw an 8.5% reduction. While cash provided by operating activities improved substantially to $16.0 million from $8.6 million, inventories rose by $11.5 million, and cash and cash equivalents decreased by $12.5 million.

Key Financial Figures

• $0.20 — which registered Class A common stock, $0.20 par value per share EPAC NYSE Indicat

Filing Documents

• epac-20251130.htm (10-Q) — 841KB
• epac10-q11302025ex311.htm (EX-31.1) — 10KB
• epac10-q11302025ex312.htm (EX-31.2) — 10KB
• epac10-q11302025ex321.htm (EX-32.1) — 4KB
• epac10-q11302025ex322.htm (EX-32.2) — 4KB
• 0000006955-25-000081.txt ( ) — 6382KB
• epac-20251130.xsd (EX-101.SCH) — 37KB
• epac-20251130_cal.xml (EX-101.CAL) — 70KB
• epac-20251130_def.xml (EX-101.DEF) — 266KB
• epac-20251130_lab.xml (EX-101.LAB) — 538KB
• epac-20251130_pre.xml (EX-101.PRE) — 412KB
• epac-20251130_htm.xml (XML) — 984KB

Forward-Looking Statements and Cautionary Factors

Forward-Looking Statements and Cautionary Factors 1

—Financial Information

Part I—Financial Information

—Condensed Consolidated Financial Statements (Unaudited)

Item 1—Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Earnings 3 Condensed Consolidated Statements of Comprehensive Income 4 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Cash Flows 6 Notes to the Condensed Consolidated Financial Statements 7

—Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations 18

—Quantitative and Qualitative Disclosures about Market Risk

Item 3—Quantitative and Qualitative Disclosures about Market Risk 22

—Controls and Procedures

Item 4—Controls and Procedures 22

—Other Information

Part II—Other Information

—Unregistered Sales of Equity Securities and Use of Proceeds

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds 23

— Other Information

Item 5 — Other Information 23

FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS

FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS This quarterly report on Form 10-Q contains certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The terms "may," "should," "could," "anticipate," "believe," "estimate," "expect," "objective," "plan," "project" and similar expressions are intended to identify forward-looking statements. Such forward-looking statements include statements regarding expected financial results and other planned events, including, but not limited to, anticipated liquidity, anticipated restructuring costs and related savings, anticipated future charges and anticipated capital expenditures. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We disclaim any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason. The following is a list of factors, among others, that could cause actual results to differ materially from the forward-looking statements: supply chain issues, including shortages of adequate component supply or that increase our costs or cause delays in our ability to fulfill orders; failure to estimate customer demand properly may result in or could have an adverse impact on our business and operating results and our relationship with customers; the deterioration of, or instability in, the domestic and international economy and challenging end-market conditions, including as a result of geopolitical activity, including but not limited to, the armed conflicts in the Middle East and potential impacts to shipping in that area, as well as the invasion of Ukraine by Russia and international sanctions imposed in response thereto; decreased demand from

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

—Condensed Consolidated Financial Statements (Unaudited)

Item 1—Condensed Consolidated Financial Statements (Unaudited) ENERPAC TOOL GROUP CORP. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) Three Months Ended November 30, 2025 2024 Net sales $ 144,208 $ 145,196 Cost of products sold 71,026 70,544 Gross profit 73,182 74,652 Selling, general and administrative expenses 43,095 42,318 Amortization of intangible assets 1,597 1,202 Operating profit 28,490 31,132 Financing costs, net 2,265 2,770 Other expense, net 668 487 Earnings before income tax expense 25,557 27,875 Income tax expense 6,426 6,152 Net earnings $ 19,131 $ 21,723 Earnings per share Basic $ 0.36 $ 0.40 Diluted $ 0.36 $ 0.40 Weighted average common shares outstanding Basic 52,980 54,242 Diluted 53,348 54,812 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 ENERPAC TOOL GROUP CORP. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended November 30, 2025 2024 Net earnings $ 19,131 $ 21,723 Other comprehensive income (loss), net of tax Foreign currency translation adjustments ( 4,662 ) ( 10,046 ) Pension and other postretirement benefit plans 279 298 Cash flow hedges ( 234 ) 72 Total other comprehensive (loss), net of tax ( 4,617 ) ( 9,676 ) Comprehensive income $ 14,514 $ 12,047 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 ENERPAC TOOL GROUP CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) (Unaudited) November 30, 2025 August 31, 2025 ASSETS Current assets Cash and cash equivalents $ 139,047 $ 151,558 Accounts receivable, net 98,067 106,085 Inventories, net 90,307 78,774 Other current assets 45,054 39,701 Total current assets 372,475 376,118 Property, plant and equipment, net 52,739 53,275 Goodwill 287,988 289,787 Other intangible assets, net 44,9

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